Planning to lodge your tax return yourself this year? Be careful as the Australian Tax Office (ATO) will be watching closely in 2018. Here are four traps to avoid.
The ATO has issued new warnings about its plans to expand its data matching and real-time monitoring, enabling it to easily spot suspicious claims or dodgy returns. That means anyone who has been potentially holding out on additional income (yes, Uber drivers and Airbnb hosts, that means you!), inflating costs or deducting items incorrectly are all in the firing line.
Each year, the Australian Tax Office sets its focus on particular areas they'll be honing in on as they review tax returns and where we're trying to reduce our taxes. This year is no different with cryptocurrency earnings, money made from new platforms like Uber, home office expenses and work-related claims on their hitlist.
What’s going on?
The ATO is generally pretty good at spotting people who do the wrong thing, whether it’s by accident or on purpose. They have access to heaps of data and can benchmark figures by occupation, income bracket and previous returns. Plus, they can even access data from your bank, employers, other government departments, overseas organisations and even directly from sharing platforms like Uber or Airbnb.
So, what’s the easiest way to get the best tax refund without running into trouble? There are a few ways to stay in the ATO’s good books.
#1 Work with a tax agent
It might seem like most people do taxes on their own but this couldn’t be further from the truth. The ATO reports that in fact 74 per cent of Australians use a registered tax agent. That’s because a tax agent works for you, not the ATO. Reputable tax agents not only have the expertise to make sure you know what you can claim, they also have systems and checks in place to ensure any potentially dodgy claims are spotted before they go to the ATO. Plus, the small-ish, once-per-year tax agent fee is tax deductible.
Still keen to do your taxes online instead of at an account's office? You can. Services like Etax.com.au allow you to lodge online and get the peace of mind that an accountant checked your return. Enlisting a tax agent usually means a bigger refund for you - without worrying that you’ll wind up under the ATO microscope.
#2 Don’t freak out
Okay, so what if you’ve done your own tax return and now you’ve received a message from the ATO requesting more information or alerting you to a possible error? It might be intimidating but even the ATO knows that everyone makes mistakes. Just because something is flagged as unusual, doesn’t mean it’s wrong.
Again, if you’re not sure, it’s probably best to ask a professional for specific advice so that you don’t miss out on a better refund just to make the ATO go away. Australia’s Inspector-General of Taxation, Ali Noroozi, backed up this point recently, saying “…frankly, I think every citizen is entitled to independent advice. They should not be getting all their advice from the tax office.”
#3 Know what (and how) to claim expenses
Figuring out what you can claim is half the battle. The other half is figuring out how to calculate those claims. Knowing this can be the difference between a smooth return where your refund arrives a couple of weeks after lodgement – or catching the ATO’s attention in the wrong way.
Correctly claiming car expenses, travel, phone and internet expenses isn’t complicated but there are specific details to know. For example, only claim the appropriate portion of the cost and only if you haven’t already been reimbursed by an employer.
#4 Stay on the books
The easiest way to stay out of trouble is to declare your income, even if it’s a cash or freelance job. The ATO can see things including bank deposits, super contributions, withdrawals and interest you earn. Make sure everything is “on the books” and declared as income in your tax return. Those who earn extra ‘money on the side’ through platforms like Uber, Airtasker or Airbnb are not exempt from declaring income. Don’t fall into the trap of thinking that, because it’s relatively new, it is passing under the ATO’s radar. It’s not.
Simone Gielis is a Senior Tax Agent and General Manager at Etax.com.au.